The conversion of a free shipping bill into DFRC is impermissible without proof of input use in exported goods, as affirmed under Customs regulations.

JUDGMENT :

BHARGAV D. KARIA, J.

1. Heard learned advocate Mr. Ankit Shah for the appellant and Mr. Monal Davawala for learned advocate Mr. Anand Nainawati for the respondent.

2. These Appeals are admitted by order dated 12.03.2007 on the following two substantial questions of law :-

“1. Whether the benefit of conversion of free shipping bill into one under the DFRC Scheme be sustained in absence of proof of use of inputs imported duty free in the resultant export product by the exporter?

2. Whether on the facts and in the circumstances of the case, the Tribunal was justified in allowing substitution of the words “under claim of DFRC” in the free shipping bill in absence of satisfaction of the conditions prescribed under Circular No. 6/03 dated 28.01.2003.”

2.1 Learned advocate Mr. Monal Davawala has sought permission to file his appearance. Permission is granted.

3. At the outset, learned advocate Mr. Monal Davawala submitted that he has instructions to appear for the respondent and the respondent – Company has been subjected to IBC (Insolvency and Bankruptcy Code) proceedings and the National Company Law Tribunal (NCLT) by order dated 16.05.2025 passed under Section 60 (5)of the Insolvency and Bankruptcy Code, 2016 read with Rule 11 of the National Company Law Tribunal Rules, 2016 has granted the reliefs, and concession sought by the subsequent successful auction purchaser which includes that any reopening proceedings, litigation involving the respondent assessee as on the date of the sale certificate dated 01.01.2025 would stand abated and no fresh claim or proceedings can be initiated. The National Company Law Tribunal relying upon the decision of the Hon’ble Apex Court in the case of Ghanashyam Mishra & Sons (P) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd., (2021) 9 SCC 657 , granted such relief and concession so as to achieve the objective of reviving the Corporate Debtor as a going concern in consonance with the clean slate principle to maximize value and ensure operational continuity. It was, therefore, submitted that both these appeals are required to be disposed of in view of the order passed by the National Company Law Tribunal which is binding upon the appellant.

4. Learned advocate Mr. Ankit Shah for the appellant submitted that the Customs, Excise and Service Tax Appellate Tribunal, West Zonal Bench at Mumbai (For Short “the Tribunal”) vide order dated 18.08.2006 has permitted the amendment in the shipping bill filed by the respondent assessee contrary to the Circulars issued by the Board which prohibited the conversion of the free shipping bill into one under DFRC (Duty Free Replenishment Certificate) scheme as there was no proof of use of inputs imported duty free in the resultant export product by the exporter. It is further submitted that the Tribunal could not have permitted the respondent assessee to amend the shipping bill for amendment under Section 149 of the CUSTOMS ACT , 1962 since the examination referred to in the Circular No. 6 of 2003 dated 28.01.2003 as well as Circular No. 4 of 2004 dated 16.01.2004, prohibits such conversion of shipping bill under DFRC. It was therefore, submitted that the questions of law may be answered in favour of the Revenue subject to the order which has been passed by the National Company Law Tribunal.

5. Having heard the learned advocates for the parties, the facts emerging from the record can be summarized as under.

6. The respondent assessee filed three shipping bills dated 29.04.2004, 01.05.2004 and 02.05.2004 at Mundra Port and two free shipping bills on 02.04.2004 and 06.04.2004 at Ka